Supreme Court Observations: Takings Ruling a Lump of Coal, Not a Gift, for Landowners

Last week, the U.S. Supreme Court ruled unanimously in favor of the property owner in Arkansas Game and Fish Comm’n v. United States, a case that raised issues under the Fifth Amendment’s Takings Clause. The Court reinstated the owner’s claims, which had been dismissed by the appeals court. It is difficult to view the Court’s opinion as a victory for property rights, however; it contains disturbing language that does not bode well for future claimants.

The Takings Clause requires governments to provide “just compensation” whenever they “take” private property for a public purpose. In determining whether government intrusion on property rights constitutes a “taking” of the property, courts generally employ a “balancing” test that considers a wide variety of factors—including the severity of the intrusion, whether the intrusion was intentional, and the owner’s “reasonable investment-backed expectations” regarding the land’s use. The Supreme Court has also established several per se rules under which certain government actions will always be deemed to constitute compensable takings.

Property owners have come to realize from bitter experience that they virtually never win when courts judge their takings claims under the multi-factor “balancing” test. Accordingly, they generally focus their efforts on attempting to demonstrate that they are entitled to compensation under one of the per se takings rules. Indeed, the question presented in a majority of recent Supreme Court Takings Clause cases has involved the scope of those rules.

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Arkansas Game did not turn on the applicability of a per se takings rule. Rather, the issue before the Court was whether government-induced temporary flooding of riverfront property—the government had increased water discharges from a federal dam—was categorically exempt from normal Takings Clause restrictions; the Court unanimously ruled that there was no such exemption. The troubling aspect of the opinion was dicta regarding per se takings rules; that dicta indicated that the per se rules are not as broad as many property rights advocates had come to believe.

A long line of Supreme Court decisions has held that Takings Clause compensation is always required when the government authorizes the permanent physical occupation of property. In its 1992 Lucas decision, the Court extended that per se takings rule to government regulations that permanently deprive an owner of all economically beneficial use of his property. The Court’s decisions involving government take-overs of private businesses during World War II (e.g., Petty Motor and U.S. v. General Motors) as well as the 1987 First English decision were widely understood as extending per se takings analysis to cases in which the government temporarily takes control over private property, at least where the occupation is more than a trivial event.

Property rights advocates sought unsuccessfully in Tahoe-Sierra (a 2002 High Court decision) to extend per se takings analysis so as to cover government regulations that temporarily deprive an owner of all economically beneficial use of his property. Notably, that decision carefully distinguished cases involving government land-use regulation from those involving government occupation. While finding that Takings Clause challenges to government regulations that temporarily render property valueless to their owners should be subject to the multi-factor “balancing” test, Tahoe-Sierra stated unequivocally that “compensation is mandated” whenever “the government occupies the property for its own purposes, even though that use is temporary.”

Arkansas Game calls that mandatory compensation rule into serious question. The unanimous decision, written by Justice Ginsburg, stated that the Court eschews application of per se takings rules except in cases involving “permanent” physical occupation of property or (as in Lucas) regulations that “permanently” deprive the property owner of all economically beneficial use.

True, the language quoted above is dicta and was written by the justice who is perhaps the least sympathetic to Takings Clause claims. Justices Scalia and Thomas (who made clear in their Tahoe-Sierra dissents that they support application of per se takings rules even to temporary regulatory takings) may simply have deemed the dicta insufficiently troubling to warrant a special concurrence. Justice Ginsburg’s language is nonetheless likely to have unfortunate consequences (from the standpoint of property rights advocates) in future Takings Clause cases. Lower court judges—particularly those sitting on state courts, which tend to be hostile to takings claims—are likely seize on the dicta as a reason to decline to apply a per se analysis to takings claims involving less-than-permanent government occupations of property. Worse yet, government lawyers can easily characterize most government occupations—even ones that have already lasted a decade or more—as less-than-permanent. The result will be an increased number of Takings Clause cases decided under the multi-factor “balancing” test, a test whose use rarely turns out well for property owners.